Congress Begins with Renewed Efforts to Repeal Insurers' Antitrust Exemption
James M. Burns
Early into the 114th Congress, multiple bills have already been
introduced that would repeal the insurance industry's limited
antitrust exemption granted by the McCarran-Ferguson Act (15 USC
1011 et seq.).
On January 6, Representative John Conyers (D-Mich) introduced the
"Health Insurance Industry Antitrust Enforcement Act of
2015," (H.R. 99). The legislation would amend the
McCarran-Ferguson Act, which currently provides the insurance
industry with an exemption from the federal antitrust laws for
conduct that is "the business of insurance," is
"subject to state regulation," and does not constitute
"an act of boycott, coercion or intimidation," (15 USC
1013), by removing the exemption for health insurers and medical
malpractice insurers. Notably, the bill would not eliminate the
exemption with respect to other lines of insurance, and is similar
to McCarran repeal bills that Representative Conyers has introduced
in prior sessions of Congress. Representative Conyers has
previously stated that his bill would "end the mistake
Congress made in 1945 when it added an antitrust exemption for
insurance companies."
Subsequently, on January 22, Representative Paul Gosar (R- Ariz.),
who was a practicing dentist for many years, introduced similar
McCarran repeal legislation, entitled the "Competitive Health
Insurance Reform Act of 2015" (H.R. 494). Representative
Gosar's bill would only eliminate the exemption as to health
insurers. In introducing his legislation, Representative Gosar
stated that "Since the passage of Obamacare, the health
insurance market has expanded into one of the least transparent and
most anti-competitive industries in the United States," and
that there is "no reason in law, policy or logic for the
insurance industry to have a special exemption" from the
antitrust laws.
Both H.R. 99 and H.R. 494 have been referred to the House
Judiciary Committee for further action. Whether these bills will
gain traction this Congress remains to be seen, but the fact that
the bill has supporters on both sides of the aisle certainly
increases the chances that the legislation will, at a minimum, be
considered by the House Judiciary Committee (which failed to take
up similar legislation in the 113th Congress).
Antitrust Claims in Auto Repair Shop Antitrust MDL Case Come to a Crashing Halt as Court Grants Insurers' Motion to Dismiss; Plaintiffs Respond by Filing Second Amended Complaint
James M. Burns
On January 21, 2015, Judge Gregory Presnell, the presiding Judge
in the In re Auto Body Shop Antitrust Litigation (M.D.
Fla), a consolidated proceeding that brought together over a dozen
antitrust cases against a large number of auto insurers, issued an
order dismissing the plaintiffs' complaint in the lead case,
A& E Auto Body v. 21st Century Centennial Insurance
Company. While Judge Presnell's decision does not
terminate the litigation – because he granted plaintiffs
leave to replead their claims – it does constitute a
significant early victory for the insurance industry defendants in
the closely-followed litigation.
As Judge Presnell explained in his ruling, the A&E
case centers around claims by approximately 20 Florida auto body
shops that approximately 40 auto insurers in the state conspired to
depress the price of auto repairs through the use of direct repair
programs, and that the defendants also unlawfully "steer"
insureds to preferred shops and away from the plaintiffs. Similar
claims have been asserted by auto shops in other states, and over
the last six months all of the cases have been consolidated before
Judge Presnell in the Middle District of Florida for further
action.
In ruling on defendants' motion to dismiss the
A&E complaint, Judge Presnell began his analysis of
plaintiffs' price fixing claim by noting that plaintiffs pled
that all of the defendants agreed to "conform to State
Farm's unilaterally imposed payment structure." For this
reason, the "crucial question," the Court explained, is
whether "the challenged anticompetitive conduct stems from
independent decision or from an agreement, tacit or express,"
and noted that plaintiffs are required to plead "enough
factual matter (taken as true) to suggest that an agreement was
made." Otherwise, the claim fails as a matter of law.
Examining plaintiffs' complaint, Judge Presnell held
"plaintiffs' allegations in this case fall far short of
meeting this standard."
Specifically, Judge Presnell concluded that "aside from
conclusory allegations that it exists, plaintiffs offer no details
at all . . . about the alleged agreement, such as how the
defendants entered into it, or when. While not fatal to their
Sherman Act claims, this bears noting." Judge Presnell then
explained that "The defendants' statements about paying no
more than State Farm pays for labor do nothing to demonstrate that
the plaintiffs are entitled to relief. It is not illegal for a
party to decide it is unwilling to pay a higher hourly rate than
its competitors have to pay, and the fact that a number of
defendants made statements to this effect does not tip the scales
toward illegality." Finally, Judge Presnell concluded that
"the fact that a number of defendants have indicated an
unwillingness to pay more than State Farm has to pay does not,
itself, raise Sherman Act concerns [because] in the words of the
Supreme Court, lawful parallel conduct fails to bespeak unlawful
agreement. Bell Atlantic v. Twombly, 550 U.S. 544, 556
(2007)."
Turning to plaintiffs' boycott claim, Judge Presnell found
that plaintiffs' allegations here were equally insufficient.
Judge Presnell stated that "plaintiffs allege (in conclusory
fashion) that the defendants 'steer customers away" by
badmouthing shops that seek to charge higher prices," but held
that "there is no allegation that any defendant refused to
allow any of its insureds to obtain a repair from such a shop, or
refused to pay for repairs performed at such a shop." In
addition, Judge Presnell added that to state a "boycott"
claim under the antitrust laws, plaintiffs are also required to
allege agreement, and "plaintiffs offer even less evidence of
an agreement to boycott than they did of an agreement to fix
prices." Accordingly, Judge Presnell dismissed this claim as
well.
Undeterred by Judge Presnell's ruling, on February 11,
plaintiffs filed a Second Amended Complaint, again asserting
antitrust claims for price fixing and "boycott." Seeking
to bolster the claims that had previously been held to be
insufficient, plaintiffs' new complaint now contains numerous
allegations concerning defendants' alleged
"opportunity" and "motive" to conspire,
including allegations about interactions at various trade
association meetings. Whether plaintiffs' new allegations will
suffice remains to be seen. Defendants will undoubtedly file a new
motion seeking to dismiss these amended claims as well. A ruling on
that motion will likely not issue until this summer. When it does,
depending on the ruling, it will likely either put an end to the
litigation, once and for all, or it will lead to the beginning of
discovery which, in this matter, would likely be both far-reaching
and expensive for the defendants. Stay tuned.
Michigan Congressmen Introduce Bill Permitting Healthcare Providers to Negotiate Collectively with Health Insurers
James M. Burns
On January 6, two Michigan Congressmen – Representative John
Conyers (D-Mich) and Representative Dan Benishek (R-Mich) –
introduced the "Quality Health Care Coalition Act of
2015." The bill (H.R. 105) would permit independent healthcare
professionals to engage in joint negotiations with health insurers
over fees and other contract terms. Currently, such conduct raises
significant antitrust risk – i.e., claims of price fixing -
under Section 1 of the Sherman Act.
Representative Conyers has introduced similar legislation numerous
times in the past. Most recently, last year Representative Conyers
partnered with Representative Benishek on similar legislation (H.R.
4077) in the 113th Congress, but that legislation failed to get
enacted. When introducing that legislation, Representative Conyers
stated that it would "allow physicians to negotiate with
insurers on a level playing field," and Representative
Benishek stated that the legislation would "improve patient
care and lower healthcare costs."
Notably, Representative Benishek, who is also a physician, also
signed on as a cosponsor to legislation that was recently
introduced by Representative Paul Gosar that would repeal the
health insurance industry's antitrust exemption. Representative
Gosar was a practicing dentist for many years. That legislation,
the "Competitive Health Insurance Reform Act of 2015"
(H.R. 494) has also been viewed – at least by Representatives
Conyers, Benishek and Gosar – as a mean of "leveling the
playing field" between health insurers and healthcare
providers.
Both H.R. 105 and H.R. 494 have been referred to the House
Judiciary Committee for further action. Despite the fact that the
legislation has support on both sides of the aisle, the prospects
for passage of either bill are unclear at this time.
Criminal Antitrust Fines in 2014 Among Highest Ever
James M. Burns
On January 22, the DOJ Antitrust Division issued a press release
detailing the results of its criminal antitrust enforcement program
for fiscal year 2014 (which ended September 30, 2014). The
Antitrust Division announced that during that period it collected a
total of $1.861 billion in criminal fines and penalties arising
from antitrust violations. This total, one of the highest ever for
the Antitrust Division, included five fines of over $100 million,
and a $425 million fine that constitutes the fourth largest fine
ever collected by the Division. (The largest fines ever imposed
were $500 million, on Hoffman LaRoche in 1999 and AU Optronics in
2012.) In the same press release, the Antitrust Division also
announced that during the past year it obtained jail terms for
antitrust violations from 21 individual defendants, with an average
sentence of 26 months. This was the third highest average ever
under this statistic.
In announcing these figures, Assistant Attorney General William
Baer, who leads the DOJ Antitrust Division, stated that "the
size of these penalties is an unfortunate reminder of the powerful
temptation to cheat the American consumer and profit from
collusion," and that the Antitrust Division "remains
committed to ensuring that corporations and individuals who collude
face serious consequences for their crimes."
The uptick in criminal antitrust enforcement is only one component
of an overall increase in antitrust enforcement over the last
several years, at both the federal and state levels. Accordingly,
it has never been more important for every entity in the insurance
industry to revisit its antitrust compliance protocols, and to
refresh and reinvigorate their training programs and audits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
